Will Firm Culture Supersede Prestige?

Jun 5, 2015 by 0

Firm culture are words too often thrown around to connote some vague set of traits discerned from the mélange of partners and associates woven into the current fabric over years. To many, the idea of a culture is overshadowed by the unending pursuit of books of business and profit margins.  In reality, however, culture is the most important trait for sustainability and productivity.

It takes a certain type of person to succeed in Biglaw, so the relative happiness for a Biglaw attorney is much different than the happiness of other kinds of workers.  We know it when we see it.  Notwithstanding, Biglaw attorneys are not robots running on an endless supply of energy — at least not yet — and have certain requirements to remain healthy and productive.

Firm culture is multifaceted and oftentimes means different things to different people, but generally the categories break down to how the firm views hour requirements, personal v. work satisfaction, substantive nature of work, priority on mentoring, leadership by example, long term view on a career, importance of diversity, and the list goes on and on.

Each category is prioritized differently, but most commonly, the first question an attorney will ask us about a prospective firm is, “what’s it like there?”

Unsurprisingly, the most common reason attorneys move firms is that they are lacking something (which they may confuse with compensation but that’s not really the underlying reason), and in my experience, the biggest cause of unhappiness is feeling underappreciated or unrecognized by the firm.   That leads to a common misbelief that the grass is always greener.  The good recruiters should have a firm grasp on the nuances among firm culture just through dealing with attorneys on a daily basis.

I believe the best direction a firm can take is honesty about who they are and what they expect.  For example, does the firm want attorneys who will bill 2,100+ hours? The best policy to attract those types of attorneys is not to sell your firm as a lifestyle firm with an 1,800 minimum.

Does the firm have strong management? How do they manage? Believe it or not, many associates like tasks that they can complete. After four years of undergrad and three years of law school with set deadlines for projects, tests and papers, many associates need a rigidly structured environment to succeed.

Other associates prefer free market systems and a more collaborative environment. For partners, that’s tantamount to an eat-what-you-kill structure. The cost of misrepresenting your firm to a lateral attorney is higher attrition that leads to a loss in revenue.   There is a significant opportunity cost incurred from lost profits that result from not maximizing the potential amount of billable revenue on the table, but also increased expenses from training, lateral agency fees, relocation expenses, and more.

For partners, culture has a very different meaning than it does to associates. Lateral partners oftentimes seem to initially prioritize pay over cohesive and collaborative culture and are oftentimes disappointed with the realities of the firm’s culture they overlooked during the recruiting process. Misrepresenting firm culture is a surefire way to see a revenue stream quickly come, and quickly go.

So which firms are noted for their excellent cultures? In my experience, firms with the strongest culture and stability are less inclined to hire for revenue but rather prioritize fit and practice.  Firms that stand out for their excellent and identifiable culture are Gibson Dunn, Paul Weiss, Keker, Covington, Kellogg Huber, and Milbank Tweed, just to name a few.

Many think lateral turnover is often indicative of a cultural problem. Firms with the most associate turnover over the last year to date were, Latham (210), Jones Day (204), Skadden (195), Sidley (192), and Morgan Lewis (188). Lateral turnover, skews with size, the firms listed above have strong cultures, but large practices. Instead, changes in leverage can be a better indicator of cultural problems. A large loss of associates without partner losses can indicate a cultural problem. Dentons and Orrick realized a loss in leverage that was four standard deviations below the average. In Denton’s case, this is not unusual given they’re still in merger mode. In most cases firms lose about an equal percent of partners and associates. Orrick had almost no net losses in partners but a double-digit loss in associates, which accounts for this change in leverage. This is not necessarily bad, as Orrick had one of the highest leverages in 2014.

Immediate changes in leverage can shock a firm’s ability to service work, or can leave them with an excess of associates with not enough work to service. Firms should strive to maintain a pyramid shape, comprised of four layers, associates at the base, counsels on the second tier, service partners on the third, and equity partners at the top. It takes a strong culture to keep a healthy leverage in check; if your leverage is too low, partners can become overtasked and unhappy with the firm, but if it’s too high, associates may choose to lateral away to another firm where they have a better chance of making partner. A strong culture engenders loyalty, and gives attorneys an incentive to stay and weather adversity.

Maintaining a firm’s culture in the long run at the expense of short-term gains pays dividends in sustainability and profitability. Less attrition means more stable revenue streams, less costs and less misappropriated resources. At Lateral Link, we talk daily to associates and partners.  It’s great to watch associates or junior partners mature into firm leaders who guide the direction of the firm. We also see the opposite who steer the ship the wrong way. With thousands of lateral moves annually, we aggregate information and use it to help firms and candidates make informed decisions based on more than a book of business or law school ranking.